High hopes for Ste-Catherine St.
On Ste-Catherine St. W., in the heart of what once was Canada’s premier retail artery, it’s hard not to notice the vacant storefronts.
On the south side of one block, five out of 15 storefronts are empty. On another block, a temporary store selling men’s suits at liquidation prices has replaced part of a two-storey HMV.
On the stretch between Crescent St. and Union Ave., 19 of 136 storefronts — almost 14 per cent — appear to be vacant.
With the recent announcement that a Garage clothing store on the street will be closing, along with the adjoining Dynamite location (the two brands are owned by the same Montreal-based parent company), it’s easy to assume Ste-Catherine St. is struggling.
But retail analysts, commercial real estate experts and the local merchants association say that appearance is deceiving.
Ste-Catherine St. isn’t on the decline, they say. Despite some concerns, all of them are optimistic about the future of Montreal’s most iconic shopping street.
One reason things look bad at first glance is that a handful of large stores on the street have closed within the past year, said Avi Krispine, executive vice-president and managing director of commercial real estate firm CBRE’s operations in Quebec.
“The issue here is not that there are so many stores that are closed, it’s that the stores that closed had large footprints,” said Krispine, whose firm is involved in some leasing activities on the street.
In recent months, two BCBG Max Azria stores — each around 3,000 square feet — have closed, he said, along with a 4,500-squarefoot Guess store.
That HMV store at Ste-Catherine and Peel had 7,800 square feet on the ground floor, plus part of a mezzanine, Krispine said, making its closure particularly noticeable.
The vacancy rate on the stretch of Ste-Catherine between Guy St. and Robert-Bourassa Blvd. is 11.9 per cent, Krispine said.
That’s high, he acknowledged. But he said things are starting to change.
A restaurant is moving into the old Guess location and potential tenants are eyeing the former BCBG stores, he said.
Other spaces on the street and in the Eaton Centre, which is being renovated and merged with the adjacent Complexe Les Ailes mall, are attracting interest, Krispine added.
“Right now, on the market looking for space, you have Michael Kors, Under Armour, Uniqlo and Miniso,” he said.
Those last two are Asian brands: clothing retailer Uniqlo is based in Japan, and Miniso, a variety store, has a Japanese esthetic but is headquartered in China.
It’s a sign, Krispine said, that Asian investors aren’t just looking at residential properties in Montreal.
There’s also the strong possibility of a cannabis retail outlet opening in the area, he said.
Other retailers are moving out of one location but staying on SteCatherine. For instance, those Garage and Dynamite stores are being shuttered, Krispine said, but their locations in the Eaton Centre will be expanding after the renovations.
There are other signs of confidence.
“Landlords still haven’t lowered rent because they’re still very optimistic with the amount of activity that’s coming from out of town,” Krispine said.
Average rent for a street-level store on Ste-Catherine is around $170 per square foot per year, according to a report released by real estate company Cushman & Wakefield. For a 2,000-squarefoot store, that works out to more than $28,300 a month in rent.
That makes Ste-Catherine St. the third-most expensive commercial street in the country, after Toronto’s Bloor St. W. and Vancouver’s Robson St.
Rents on the street are comparable to those at Carrefour Laval, which has the highest rents of any mall in the region.
While high rents are a sign that landlords are confident, they’re also one of the factors leading to vacancies on the street, said André Poulin, the head of Destination Centre-Ville, the local merchants association.
Poulin said the challenges facing Ste-Catherine aren’t specific to the street; there are also broader factors at play, like the rise of online shopping.
“Yes, there are vacancies, but it’s the same thing everywhere in the world,” he said. “There are vacancies on American streets, on the other commercial streets in Montreal, in Europe.”
The number of places people can shop is rising faster than consumer demand, Poulin said.
“We don’t have more consumers — and consumers don’t have more money to spend,” he said.
Buying patterns are also changing, said Craig Patterson, founder and editor-in-chief of Retail Insider, an online industry trade publication.
“Consumers are spending differently, people are buying more technology, they’re going to restaurants more and seeking out experiences,” said Patterson, who works as a consultant for the Retail Council of Canada. “Cost of living is going up in Montreal and other cities, so there’s just less money to shop — and people are shopping and spending their money in different areas.”
The proposed Royal mount mega mall in the Town of Mount Royal is intended to take advantage of some of those trends, promising significant restaurant and entertainment offerings alongside retail stores.
But Poulin said he’s worried the project, which will dramatically increase the amount of retail space in Montreal, will have a negative impact on downtown merchants.
“We are very concerned,” he said, “because there’s really no need for it.”
More space without more consumers means “everyone will do less business,” Poulin said.
The developers behind the project say they expect it to compete more with off-island centres like Carrefour Laval and Brossard’s Dix30 rather than on-island businesses. They tout their investment in a hotel and residential development attached to the Ogilvy store on Ste-Catherine as a sign of their sincerity.
Patterson said it’s too early to say what effect Royalmount will have on Ste-Catherine and other commercial streets.
While the megamall will be a different type of retail environment than downtown, he said, “anything in the region is going to be competing with Royalmount, which is going to be shiny and new.”
Ste-Catherine is also facing competition from other commercial streets.
While streets like St-Viateur in the Plateau have long been home to local merchants, Lululemon recently opened a location on that street, which has little or no commercial vacancies.
“That’s where the action is — that’s where people are going,” said Andrew Cross, publisher of commercial real estate magazine Espace Montreal. “They’re also going to Griffintown and Little Burgundy.”
In Mile End, the increasing number of office tenants is boosting local retailers.
“There’s more people on the street to spend money there,” Cross said.
Soon, though, Ste-Catherine St. will be getting a new look. Construction work on rejuvenating the street has already begun.
While Poulin is worried about how the construction will affect merchants, he thinks it will be good for them once it is completed.
“We think it will be very useful to reinvigorate the street, which has not been refreshed for years,” he said.
So far, the construction is having a limited effect on merchants, Poulin and Krispine said, but that could change.
Poulin is optimistic that the city will compensate merchants affected by construction, and that will mitigate any negative impact.
The details of how that would be done are still being developed.
Within a few weeks, a committee of experts and representatives from the business community will start meeting to develop an economic action plan for the city, said Robert Beaudry, the member of the city ’s executive committee responsible for economic and commercial development.
That plan will include measures to aid merchants affected by construction. It’s scheduled to be released at the end of May or in mid-June.
“We are always concerned about the state of Ste-Catherine,” said Beaudry, whose city council district includes the section of SteCatherine in Ville-Marie east of Robert-Bourassa.
The new administration reviewed the redevelopment plan, to ensure the impact of the construction would be worth it, he said.
Elements of the project — like an inflated tunnel and heated sidewalks — that might have hindered access to stores or caused work to take longer, he said, were dropped to avoid affecting merchants.
But fears about the impact of construction may make some retailers hesitant to open in vacant spaces on the street.
“It’s probably scaring off a lot of people,” Cross said. “They’re going to have to weather the storm of that, which, as we’ve seen from other streets in Montreal, like StDenis, can be a real hit for the retailers.”
The retrofit of the street will also reduce parking, which is already a problem in the area, Poulin said.
In order for commercial streets to thrive, they have to have the same conditions that will attract people as shopping centres, he said.
That will mean building more underground lots or constructing indoor above-ground parking, like at the new Maison Manuvie, which has seven storeys of aboveground parking.
Still, despite these challenges, Ste-Catherine continues to attract interest and investment.
“There are still many real estate investors that would love to buy buildings on Ste-Catherine St. We saw the Banana Republic building sold for a record-breaking price last year,” Cross said.
And many retailers feel the same way.
“There’s still a lot of people that want to have their flag on that street,” he said.
It’s probably scaring off a lot of people. They’re going to have to weather the storm of that.